On today’s show we cover:
- Accelerators and Incubators in Africa, how do they compare with others that you have seen?
- When many people do not know is how advance Africa is in mobile payments compared to the West.
- How is working with non-profits there to procure funding? Is it easy thing to do? How do they screen companies?
- How would you recommend a company going about procuring the resources they need to grow?
Contact Paul:
Linkedin: https://www.linkedin.com/in/paul-kallmes-8a0376/
Email: pkallmes@gmail.com
CONNECT WITH SHAWN
- Shawn Flynn’s Twitter Account
- Shawn Flynn’s LinkedIn Account
- Silicon Valley LinkedIn Group Account
- Shawn Flynn’s Facebook Account
- Email Shawn@thesiliconvalleypodcast.com
Announcer 00:00
You’re listening to the Silicon Valley podcast.
Shawn Flynn 00:02
On today’s show, we sit down with all coulombs, who’s an independent technology professional with a focus on or startups coming to the US with a specialty in the strategic management of intellectual property is nearly 20 years of IP, and technology licensing. And management has given him a broad base in the nuanced expertise of developing and deploying intangible assets to the benefit of IP owners and users alike. All currently focuses on assistance startup from various European, Asian and African countries, allowing him to see a wide range of opportunities that might make positive contributions, various markets in the US and around the world. On today’s show, we talk about what has been his experience with the pitfalls, Western money entering the African ecosystem, and how much more advanced is mobile payments in Africa compared to the west. This is much more today’s episode of the Silicon Valley podcast. And don’t forget to like and share and write a review on iTunes to encourage us to create more content like this. All right, now let’s start the show. Enjoy.
Announcer 01:10
Welcome to the Silicon Valley podcast with your host, Shawn Flynn, who interviews famous entrepreneurs, venture capitalists and leaders in tech, learn their secrets and see tomorrow’s world today.
Shawn Flynn 01:27
Paul, thank you for taking the time today to be on the Silicon Valley podcast. I’m excited for you to be here. I mean, I’ve known you for years, I’ve seen a lot of your work, helping startups working at incubators, guidance, government groups, this goes on and on. But enough of me talking. Can you tell our listeners a little bit about your backstory in your career up into this point?
Paul Kallmes 01:46
Sure. Well, thanks for having me, Shawn, always happy to see you. And the chance to talk about the work I do nowadays, I have a very diverse professional background, most of my friends would say I can’t hold a job, to some extent there, right. But I’ve considered that professional diversity to be a real strength when it comes to recognizing and solving problems. I’ve been in San Francisco a little more than 12 years, doing pretty much everything in the tech ecosystem. I used to be the general manager of the vault in San Francisco, which drew people from around the world. And I mean, from all around the world, entrepreneurs, startups, investors, government, folks, academics, you name it, but gave me a real really deep overview of what goes on in startups from all over the world, the things they do right things they do wrong. And that’s the kind of grounding that I’m nowadays, trying to turn into advice, guidance, counsel in a variety of activities. So they can learn from my experience and avoid some of the mistakes that these startups make. As you know, people show up in Silicon Valley with a lot of preconceived notions of what goes on here, most of them not that accurate. So we try to provide reality checks, help them at least make fewer mistakes, if not actually make progress more quickly. And its very gratifying work when it does work.
Shawn Flynn 02:51
Now, from my understanding one of your passions right now, one of the areas you’re working on is working with African venture funds, you tell a little bit about that share what your experience has been?
Paul Kallmes 03:02
Sure, Africa came along, and I didn’t go looking for it. But over the last year and a half, I’ve had a great deal of engagement with about a half dozen countries in Africa, in 2019. I was in Nigeria, and in Cape Town in South Africa, at Tech conferences, meeting people teaching classes, both for startups and for investors, the energy, the enthusiasm, the talent are all palpable. I mean, there’s a huge hunger for opportunity and for resources and the chance to show what they can do. As the old saying goes, talent doesn’t recognize area codes or zip code. But what they do lack is equality of opportunity, like we have here. Everyone knows how much goes on in this part of the world. Africa doesn’t have that yet. They do have activity. They do have small capital markets, certainly promising emerging markets, but it’s not there yet. So we’re trying to use our resources and our energy to provide opportunity to where these startups and to investors in Africa. So you mentioned the venture funds. I’ve been very lucky to meet some prominent GPs who run funds, right now only in South Africa. They have engaged us, myself and my colleagues here in the Bay Area, to mentor their companies, their portfolio companies, not to become Silicon Valley companies, but to learn about best practices from here that would apply when properly adopted and adapted to conditions in their home country. So they can build a more solid foundation there, use that as a base for international expansion. In fact, we had five companies from a fund based in Durban, South Africa. It was here in January this year, just before the shutdown, and that was great. They were young, enthusiastic, worldly, but they never been here before. So we threw a lot at them, probably more than they could legitimately expect to consume in just two weeks. But they went back with a much broader base, not only of experience and exposure, but connections to myself and the 22 mentors that I brought into the program. So that’s kind of a pop-up network of professionals in this part of the world. That is unlikely they could have made it on their own. So one of the real benefits of working with these funds, and to give them credit for being visionary about this is not just the training the mentoring, but it’s the connections, and the exposure to people around here who both are part of the program, they’ve had a demonstrated enthusiasm to help startups come out of Africa. So it’s been great. And we’re now looking forward to expanding out of South Africa, because there’s lots of opportunity. In all over the continent, there’s 1.2 billion people, the definition of emerging market, but there’s been some real successes there. And we hope to help drive more of them.
Shawn Flynn 05:21
five companies, with the 22 mentors. What were some of the feedbacks from the mentors of areas that they were either surprised that, wow, these companies have way more going on in this area than we thought, or the opposite going, Wow, they’re really lacking in the certain areas, the certain part.
Paul Kallmes 05:40
Well, every company has strengths and weaknesses. As all startups do. The best comment we got was from a friend of mine, who happens to be an XPath, South African, he came to our demo day. And he’s a member of an angel network here. And he told me after the event, when the five startups presented, he said, these are better than any companies I’m seeing here in San Francisco, which I thought was assuming he was being honest. And I’m sure he was, that was a real compliment to us. Because we worked really hard, we really transform these companies in two weeks. They like the usual things that startups lack, which is a long-term vision, which is maybe relevant corporate experience to be good managers, in addition to being good entrepreneurs. But for the most part, they were well chosen by the group down in Durban. And they came here with a pretty clear mandate, pretty clear mission. And all the mentors that I brought in, knew what terms of engagement were. And they did a great job, not pushing too hard, but also holding them to account. So we feel like they got a sort of an object lesson in how to learn a lot in a very short time. So probably overdue, I would use fewer mentors, with a longer engagement reachable next time. But they got their money’s worth for sure.
Shawn Flynn 06:41
So the companies there, do they have accelerator programs or incubators, or the companies when they start out? What do they have there right now?
Paul Kallmes 06:51
Well, that’s really good question. It varies country to country to the more advanced economies, South Africa, Kenya, Nigeria, Ghana, those have well established infrastructures, they have capital markets, they have some precedent, or promising companies growing and getting acquired or possibly even going IPO. But it’s not evenly distributed. I did a Google search, I think there’s some 650 incubators and accelerators around Africa continent of 1.2 billion people, probably a lot less per capita than you’d have here in Western Europe. But that’s still a lot of people. That’s still a lot of talent being aggregated in these incubators and accelerators. I haven’t gotten much sense that the university systems there do a lot. I know most universities in North America are pretty active in some form of entrepreneurship, encouraging it, teaching it, supporting it. So I think there’s some there’s a lot of infrastructure to be filled in, in Africa. But if there’s 650, institutional forms of incubator accelerator, there’s bound to be some companies, one I know fairly well, is based in Cape Town called startup Bootcamp, Africa. And it’s run by two guys who are very accomplished. entrepreneurs, investors, mentors, they run, probably the most popular program in Africa. And they get a great deal of almost 2000 applicants for 10 slots. The second half of 2019, we’ve talked to them about we’d like to work with your companies, once they graduate from your program, would some of them be appropriate to think about coming here raising money here and setting up shop in the US? Same way we’re approaching with a venture funds? It’s all about finding what are the resources that can identify filter, nurture those promising companies and bring them out into the world?
Shawn Flynn 08:23
Do you think there’s a big appetite or Silicon Valley investors to invest in these African startups?
Paul Kallmes 08:30
I’ll say not yet, not only because a relative unfamiliarity by Silicon Valley folk with what goes on an Africa, most Americans aren’t that familiar with Africa. And so we have a real market education task ahead of us. However, any good investor looks at the nature of the opportunity, the risk profile and the de risking that the startup managed to achieve, to make a decision. Sure. There’s unfamiliarity this distance between here and Africa. There are different tax different regulatory regimes, certainly different business mores. And that unfamiliarity is not going to make them more comfortable at the outset, there is investment going to Africa from all over the world. Any investor here willing to give it a chance to listen to what could happen would have a chance to make a decision whether it’s their own risk profile or not. That’s all we ask for is to be judged on the merits. We want to eventually we want not to matter at all that somebody is young, or from Africa, or a first-time entrepreneur, we want them to be able to stand on a par with any other startup anywhere in the world, and make a case that there is worthwhile investment.
Shawn Flynn 09:27
you’d mentioned an accelerator in Cape Town. How is that accelerator? Is it very similar to the models that are here? Maybe an investment for equity, a certain timeframe, maybe 12 weeks? What’s the structure of accelerator programs like there?
Paul Kallmes 09:43
It is very similar. In fact, they’re a branch of a Dutch organization startup bootcamp. And I believe they take 10 companies every six months, they make an equity investment. They I believe the program runs for six months, and they have their own facility in a beautiful building in the heart of Cape Town and it’s a very deep engagement by the staff and the mentors with the startups. They’ve fledged a lot of great companies out of it. I’m not intimately familiar with it. I know the guys who run it, and they’re very, they’d be impressive anywhere. And so I think there’s, if you get a chance to uncover opportunities like that, yeah, I think any investor here would say, Boy, I’d at least like to know a little more about this, whether or not it’s for me, I can’t say yet. But one thing I can tell you, valuations a lot more favorable down there, there’s a lot fewer investors in the overall poking in buying at these opportunities. So those who have a bit of extra risk tolerance, or a desire to try something new, could certainly do well in the more developed economies in Africa. And that’s one of the things we’re trying to do is make those opportunities visible to people up here.
Shawn Flynn 10:39
The companies that are coming out of these accelerators, kind of what areas of tech are they focused on?
Paul Kallmes 10:45
Well, that’s good question, too. I think if you look at the majority, or the distribution of tech focus on African startups, you’re going to find a different mix, of course than you would hear, for example, mobile payments. mobile payments in Africa, are much more advanced than they are here. For example, of course, the US is heavily regulated, and you get some big players and a lot of resistance to change. Or the big guys want a piece of it before some startup comes along and takes it out from underneath them. I think mobile payments have been slow to come along, given the size of the economy here. But in Africa, of course, the mobile phone has been the dominant mode of communication and transaction longer than has been here. They just don’t have the infrastructure and the history of building these things up. We have in the US in North America and Western Europe say as one example of that, when I was at the vaults a couple years ago, I hosted a Nigerian company called paystack. We had a great event 100 xpat. Nigerians who came and visited with the company, the CEO and his team were here. And just yesterday, the announcement came out that they were required by stripe for $200 million. Congratulations to them. That’s a great outcome $200 million. And Africa is proportionally a lot larger than 200 million here. Good on that. But stripe is also smart to get into the African market by acquiring one of the leading companies, although I don’t think they were one of the bigger ones. I know when they were here two years ago, they weren’t. They had processed I believe $45 million worth of transaction, which isn’t bad, but you’ve recovered. That’s not a huge number. So but it does show there’s m&a activity. You know, stripe went there, pick them up, and probably looking at other opportunities as well, but it’s far from over. It is not a crowded landscape like it is here.
Shawn Flynn 12:15
What about other areas of technology, maybe ag tech or FinTech?
Paul Kallmes 12:20
FinTech, but not the way we might normally think of it. You know, a huge portion of the African population is unbanked. I think 60% of people don’t have bank accounts. Here, I’m guessing it’s a much, much smaller number. And so you’ve got opportunities now with FinTech platforms, and better mobile communications, to give them the equivalent of banking capabilities. There’s bound to be a lot of those. I don’t follow FinTech particularly closely myself. But I know there are lots of startups in that area. I think, yes, ag tech, West Africa is a big con and a lot of desert. They’re very, very rural, very agrarian. I’m sure some of those are filtering out a lot of mobility. I once did a pitch event. This is now three, four years ago. And it was by Skype from Lagos, Nigeria, there were five companies, three of them were apps to tell you how to get across Legos. That’s pretty specific. Because Legos is a nightmare of trap. And not just because of congestion, or road quality, any number of reasons. It’s quite a place. If you like high energy cities, you can’t go wrong. And Legos, three out of these five companies had taken on the exact same problem, twin buses, taxis front bicycles to get across town. So it shows an immediate need an immediate solution that may or may not have been applicable to other big cities, you know, I’m sure in Nairobi and, and Johannesburg have their own issues with traffic that might be equally applicable. So you’re finding that kind of thing. There are some medical devices, I’ve met a medical device company coming out of university of Johannesburg, probably all the same categories as here, but maybe it will be a different proportion. Like I say, mobile payments, mobility, FinTech, for the unbanked, again, it reflects conditions on the ground throughout Africa. And of course, a small country like the Soto, which is inside South Africa, as compared to Mali, which is gigantic, you know, you’re going to have different needs, and therefore different offers solutions.
Shawn Flynn 13:57
Because the different countries in Africa company wanted to expand, say one of these companies that just graduated from an accelerator program, is the next market for them the US or is it other countries in Africa? What is the market expansion plans normally?
Paul Kallmes 14:12
Well, again, I’m no expert on Africa, I freely admit to knowing almost nothing. I’ve been there twice, but I’m not really I’m not an expert in any way. I probably never will be. And that’s okay. I know lots of people who are, and I’m happy to listen to what they have to say. I think when it comes to local to regional to continent wide, and then internationally, it’s going to depend very much on a case-by-case basis, for sure. I know when paystack was here, they were looking at the landscape in the US to see could they play in it? They decided at the time they couldn’t, it was probably a good decision because now they’ve been acquired. But I think there are certain types of solutions, it would be amenable to an outreach up here. I can tell you one of the companies we work with, does a smart SMS marketing, which is not very common here. If you get a text on your phone, that’s a marketing pitch of some sort. You’re more likely to delete it as soon as you read it. Well, this company, which is relatively new to the market down there is doing 7 million in revenue. This year, we’ll do 7 million this year, businesses increased because of COVID. They are planning to come here, travel conditions notwithstanding, in 2021. So they have dedicated funds for a repatriation from South Africa to San Francisco. And in fact, that’s the kind of company that have done their homework, they built a solid base at home, they raised money from a well-known venture fund, specifically for the move to the US. And so we’re, we’ve been engaged with them for the last three months. And it’s been very successful, because not only have we refine the way they talk about their value proposition to investors, for here and anywhere else. But we’ve also taught them what’s different on the ground, here are some resources they could use to make better decisions when they come here, or when they prepare to come here. And when they actually arrive. One thing I haven’t mentioned, is a venture that I started with a guy named Mark white, and the law firm, white summers in what city is called African house, if you drive east on Jefferson Avenue, just before you hit veterans Boulevard, if you look to the right, you’ll see a big white wall with a continent of Africa painted on it. And it says Africa house, or white SpaceX, which is a venture that mark started marks visionary in his own right. And we use that space, we used it when the company’s we’re here in January. And we use it both physically and virtually for companies, or investors, or academics or government folks who want to learn about the US get exposure to what goes on here without necessarily setting up shop here on our own. So Africa house, in Redwood City, is designed to be a fully functional resource for anybody who wants to come here, for whatever reason. And the other direction as well for American or other companies that want to learn about what goes on in Africa. Where could they go to explore this data, the other, we can provide resources, connections, and some experience in how those things work.
Shawn Flynn 16:45
But learning about Africa, coming from the Silicon Valley mindset, which someone know,
Paul Kallmes 16:50
well, it’s all about expectations, like most things, entering any new market is full of risk, although going from the US to Canada is one thing going from the US to Ghana would be a different one altogether, it’s impossible to do too much homework when it comes to understanding what the market conditions are like, for whatever you play in. Understand the competitive landscape is huge. Understanding taxation, and, and banking rules are really important, cause you’re going to be dealing with that, regardless, understanding employment law, a lot of companies get surprised when they hire somebody, say, in Germany, and they haven’t liked them anymore. It’s not you don’t just fire them, right? There’s a whole different way of doing business over there. So you really got to know these things. I think a lot of folks take for granted that the rest of the world thinks like we do here, the rest of the world does not think like we do here. And that’s some people think of it as a Silicon Valley arrogance, I think it’s just not paying attention. You shouldn’t have anybody who’s traveled even once will know that things are different in other countries, that applies every aspect of doing business. In some African country, some of it would be similar enough, where there’s language barriers, or negotiation style, you just got to do your homework. But I think there are lots of resources out there, people and resources that we know, but there’s no shortage of other places to go to look for information. There’s consultants, there’s lots of government information, take it in, decide what makes sense for you and act accordingly. But don’t just go in there blindly, you will get burned, for sure.
Shawn Flynn 18:07
you’d mentioned a company raised VC funding specifically for coming to the US to set up operations. How much funding is available for these startups? Is it mostly just VCs? Or are there a lot of individuals invested in companies? Or is it government investment where some of the money coming from to start these companies?
Paul Kallmes 18:26
Well, like here, there is a mix of funding sources, there are Angel networks, although they’re not nearly as robust as they are here. And in Europe, it hasn’t emerged yet. There’s not enough precedent, a bit of a catch 22. How do you demonstrate to medium or high net worth individuals that these are risks we’re taking until enough people have taken that risk. So the angel networks are pretty weak. In my experience, I’m sure others have other experience that might counterman that, I think on the venture side, there are some very successful funds, knife capital is a very well-known one, we work with a couple ventures and IDF capital, that are run by very, very accomplished, very dynamic GPs, and they’ve got great portfolios. And we’re really pleased that they think enough of us to work with us and to provide useful guidance to their companies. We also think that we can do a lot to channel resources from here, whether virtually, or when they come here in person, to put them in front of investors to show opportunities that are worth pursuing. I’d say venture is probably the most common source of money, there is government money, but like governments everywhere, it takes forever to get on with lots of strings. Usually, there’s a timeline mismatch startup needs money in the next three months. And the first round of applications takes three months just to get going. But I think there’s like most places, governments are not really suited to the needs of startups and companies that might be in growth mode. Just there’s just a mismatch there. At the top end of the scale, private equity money has a bit of a field day in Africa. There was a story last week about some nightmare stories, private equity firms from the west US, Europe, coming into Africa and just taking advantage of companies. They are gutting them saddled with debt, and then well good luck, not the only place it happens. And I’m no expert on the topic. I think its always buyer beware or seller, beware, if you get an offer that seems too good to be true, it almost certainly is, whether you’re in South Africa or South Carolina. And I think that’s there’s a lot of good lessons from looking at the trends in investment from different sources over the years. But it’s still early days in the African investment scene. There’s no doubt whatsoever about that.
Shawn Flynn 20:18
What about with nonprofits is that a way to get money for these companies?
Paul Kallmes 20:23
Here, of course, nonprofits are highly regulated. So it’s, that’s a different kettle of fish down there, there’s lots of aid money available. And that might be maybe indirectly convertible into some kind of play, or some kind of resource base to grow a startup. And there’s lots of things to help with prenatal care and child vaccinations and basic infrastructure, light and water and things like electricity, things that haven’t really evolved or the way they have here. I would guess that the nonprofit landscape, the aid, whether it’s aid from private organizations, or governments, or you know, USA ID, or the Gates Foundation, the bigger philanthropies specialize in emerging markets, going to be a pretty broad spectrum of acts simplicity of access to that money, but I probably wouldn’t count on it. Again, I’m guessing the turnaround time, from application to receipt of funds is too long for most startups to tolerate.
Shawn Flynn 21:09
I would wonder what the screening process would be like as well, the nonprofit’s cause if it is not right, really with that regulated, I’m kind of curious how they would make their decisions.
Paul Kallmes 21:19
But I’ve worked with several nonprofits over the years in the emerging markets, although never in Africa, what we always found is that promises of accountability, actual accountability, there’s often a gap between the two, they just don’t have either the maybe the habits or the infrastructure there to track the money, the way it’s expected here, you know, an American nonprofit that raises money from the Gates Foundation understands the stringent rules that apply to that money, how it’s going to be used, and how it’s gonna be accounted for. That’s just harder to do remote area of a giant African country, where there’s little communication, it’s just harder, I give credit to any philanthropy that takes a risk on part of the world where they can’t expect the same type of treatment of their money, you know, give them credit for taking a risk. That’s just the way the world works, right? Can’t have everything everywhere. If conditions in Africa were the same as they are here in the US be a much different world. Africa is up and coming Make no mistake, there is no doubt, lots of opportunity,
Shawn Flynn 22:09
then how does really startups obtain resources, the resources that they need? I mean, it sounds like it’s just kind of difficult overall,
Paul Kallmes 22:18
I would say I’ve met people who are absolute masters of bootstrap. I mean, they really make the most of very little resource. So they’re good at that. And that’s, that goes a long way. In any startup. You know, bootstrapping is a fundamental element of any early-stage company, no matter where you are, certainly, I don’t know enough of them, their stories well enough to say that friends and family is plays a bigger part, or that maybe there are Angel networks, but they’re just not publicized. Therefore we don’t know about them. And I don’t know the number, I don’t know, the numbers in terms of, say, university graduates in engineering and computer science translates into X number of startups around those technology areas, as it would be around here, Stanford, and Cal, and all sorts of other things that crank out lots of people who have access to lots of resources. Again, it’s that notion that talent doesn’t respect area codes, but opportunity does. And you just don’t have the opportunities there that you have here. I’d be curious to see someone’s brought that data together, I’m sure. So I’d be interested to see, that’s part of our learning curve, too. I mean, we’re still on a very, very steep learning curve. We’re open to anything that changes the viewpoint we have. Because we know that being so early in the game, we have a lot to learn. But we also know the people we’ve met, and the opportunities we’ve seen, certainly justify more of the same. We feel no, we’re not intimidated at all by the strangeness of Africa as a whole. And the way businesses are run there and the way they’re grown as compared to where we used to hear.
Shawn Flynn 23:35
If you’re the Silicon Valley investor, you want to go there and find companies, how do you go about building your network?
Paul Kallmes 23:42
We did it by going there, we were lucky to know some people in Nigeria and South Africa, who were very gracious hosts put together big events where we lots and lots of people. And there’s a great hunger for people there to meet foreigners coming to their country to show interest in it. It’s still a human contact kind of world, for all the virtual and digital capabilities we have, it’s still a person-person world. Now, of course, it’s a lot more difficult. But you can do a lot, you still do a lot. There are lots of conferences that you can go to. And I think over time, people will become more habituated to using the virtual platforms as a way to meet people or LinkedIn is a force everywhere. And you’ve got other platforms that that will be they will emerge as better ways to meet people, more specific interests, trade associations, presumably bring together practitioners from around the world and assume a greater importance. Now that everything is digital, call us. I mean, we were having to make referrals any way we can we share anything and everything we know, with anybody who wants it because we take no ownership of anything that we own, we take ownership of is the responsibility to promote with proper cautions what it’s like to do business in Africa or anywhere else that we work.
Shawn Flynn 24:45
You mentioned before that there’s kind of been some experiences where private equity groups have come into Africa. What have you seen, what have you heard?
Paul Kallmes 24:55
Well, I mentioned that article that I read, has one data point. It was posted by someone who gets a lot of respect on this African investor group, I’ve seen it happen here. We’ve all seen it happen here. So it’s no surprise that it would happen there. Again, without knowing the specific details of these deals, it’s hard to say, any place where there’s opportunity, you’re gonna have folks who go in with good intentions and not so good intentions. And, and a lot of folks look at private equity is basically an elaborate get rich quick scheme for the few who are in charge of the resource. I don’t know much more about it; I probably shouldn’t say too much more. I’m not an expert in any way. All I know, is what people have told me they’ve gone through. So like everything else, buyer beware, if the deal looks too good to be true, it almost certainly is. So do your homework, do your due diligence and act accordingly.
Shawn Flynn 25:36
What are some of the pitfalls that of Western money entered the ecosystem?
Paul Kallmes 25:41
We get that question a lot, actually. Because it’s mostly about expectation misalignment. You know, here, people have a certain expectation of investment and return, or they expect an entrepreneur to be able to outline their vision of investment of return. And in Africa, there’s a lot, there’s different types of uncertainties, there are different types of obstacles and risks. And therefore, it’s hard for people here to judge them, and to model it out within their own heads or on a spreadsheet, and how that’s going to change the way the returns they expect. So I think, unfamiliarity with the way things work in South Africa, for example, would make it really difficult for an investor here, too. If they use the same reasoning, and the same modeling techniques that they use for startups here, they’re probably gonna be disappointed if they take the time to talk to their peers, to fellow investors, talk to some companies that have raised money and seen how it’s gone, they can certainly modify their views, and have a better understanding of what particular company in a particular technology at a certain stage of development could offer in terms of investment and return. It’s always buyer beware, whichever side of the transaction you’re on. So I think it has to do with being willing to modify our expectations here into what’s different down there anywhere in the world, certainly not just Africa.
Shawn Flynn 26:51
So with that, can you share a couple of stories of your experience in Africa.
Paul Kallmes 26:56
I was in Legos. June of last year, we were at a conference organized by our colleagues. And it was great. It was probably 1000 people in a building. At one time, they had asked me to teach a, my diagnostic bootcamp was a condensed version, just two hours of here’s how you go about stating your case for value in a startup you’re trying to run, they had to organize it. So there were going to be they were going to basically auction off 40 slots to sit in my class. They said, well, that’s came all this way. I don’t want to talk to 40 people, I don’t talk to as many people as want to learn. The MC said, Well, I got this and the MC was kind of a showman. So he’s out there. And he said, Okay, number one. And he would ask a question, if somebody answered it, they got the tickets. And then number two, and I’m thinking to myself, we’ve only got two hours, you’re eating into my time here. And then I went to and I said, could you could we maybe just pick 40 people out of it? He goes, No, I’m gonna do it this way. I thought to myself, well, I’m only here once not gonna waste this opportunity. So I said, Can I see your mic for a sec? So I took his mic. And I said, any woman who wants to be in this course, please come to the front of the room. We had legitimately a stampede, probably 200 women jumped up from the audience and the people behind me, the organizers, they’re screaming No, no. So I caused a stampede. And they came up and the guy looked at me and he said, now what have you done? I said, let me talk to these people. Let me give them what they’re here for. It doesn’t cost anything. I’d love to talk to as many people; it’ll be a different type of class. So that’s what we did. We ended up totally scrapping this idea of making it exclusive. Because we’re all about inclusivity causes Stampede. And in fact, one of the organizers, I’m working with her again, on a new project, a new accelerator that I’d like to mention in a minute in Mauritius. And we were on the phone the other day, and I said, Hey, remember the stampede and she’s like, I will never forget it. So but that just goes to show the hunger and the enthusiasm. They have anybody to listen to them or to try to convey something useful to them. So that was a great time.
Shawn Flynn 28:42
You have to follow up with them their story.
Paul Kallmes 28:45
One of the things I’m working on now is a great initiative coming out of Mauritius. You know where Mauritius is. I didn’t either. It’s an island about 200 miles off the east coast of Madagascar, the Indian Ocean, but as far from San Francisco’s as possible to get. I think if you go past it, you’re on your way home. Mauritius is like the Delaware of Africa. They’ve got a very favorable tax regime. And so every corporation, every venture fund sets up version of a C Corp in Mauritius. So I got a call a few weeks ago from my Nigerian friend and her colleague, they’re starting a new incubator accelerator, slash, I say like a finishing school starting and finishing school for startups. It’s called future females invest. And it’s designed to attract female founded startups, not exclusively females in the company, but founded by women throughout Africa to match them with capital to nurture them from the earliest stages up to some inflection point, maybe getting their initial products to market or finding their first customer, or at least getting them ready to present to investors. And so they asked me to help structure this program. And I said, I’ll happily do that. I have a phone call this coming Monday night at 11pm. The time it’s 11 hours later, that’s 10am on Tuesday morning in Mauritius. They’ve got 20 government people coming in, talk about what is this going to be you want to get accredited. Well, what are you doing that deserves accreditation, they’ve asked me to get on the phone and to present like a zoom call to talk about, here’s what goes on in Silicon Valley that we can convey to the participants in programs throughout Africa, who will be there both virtually, and literally, they want people to move to this island coast of Madagascar, to engage in startups, but to basically be resettled. So it’s a combination of training, startup training, economic development and resettlement into the island. They call the island vibe. I think that’s a really unusual way to structure an accelerator program, but that’s what they’re doing. And I’m pleased they’ve asked me to help out with it. I’m happy to do so.
Shawn Flynn 30:35
Now, if you were to move to anywhere in Africa, where would you move?
Paul Kallmes 30:39
Everyone says you got to go to the Stellenbosch which is the Napa Valley of South Africa, but an hour north of Cape Town as an understand it. I’ve never been. I’ve seen lots of pictures if I had to. So that’s the only place I’ve heard of that. Everyone says you got to go there. I have a sense of adventure. I would certainly try Nairobi; I would I try a city I wouldn’t want to move to some rural area. I wouldn’t know what to do in a place like that myself. I’ve heard great things about Abidjan and Ivory Coast Cote d’Ivoire course it’s a French speaking country. And I don’t speak a lot of French but I’m sure I could learn. So I’d say Nairobi maybe across supposed to be great. In Ghana, I believe cape town’s great, everyone raves about Cape Town legitimately. So Johannesburg maybe a little less, I’d say Cape Town Nairobi, or Accra? Or Abidjan? Those would be my four that are no, although I talked to a woman from Morocco, Morocco sounds I’ve always thought Morocco is interesting. You know, what’s Marrakech or fez or Casablanca? And mythical names, I would say that list of five would be the top one city for each of those countries would be just to see it bound to be an adventure no matter what.
Shawn Flynn 31:37
And what do you think lies ahead in the startup ecosystem for 2021 2022?
Paul Kallmes 31:42
Well, the big picture meaning the state of the world and our ability to travel and, and not be in fear of our lives, I guess I’m a little pessimistic on 2021. I don’t seem at least in the US here. I don’t see much changing given the way things are going with spikes, and Reza Coronavirus cases, and uncertainty and fear and lack of leadership, these are pretty big impediments to anything going back to whatever the new normal is, is not going back to what used to be sure that the inability to travel, although it’s, in my case, monumentally inconvenient, also forces us to be clever, to be focused, to stop complaining about what used to be and start looking forward to what will be. And I think, for 2021, it’s going to be more adaptation, like we’re doing now. So I feel like we’re all in the same boat, or we’re not sure what the boat actually is. So I think 2021 is going to be a pretty tough year as well. Hopefully, by 2022. They’ll be vaccines, there’ll be enough realization by enough people that wearing masks and getting vaccinated and observing proper protocols around minimizing disease transfer, take hold. Until that happens, I think we’re going to be stuck in this virtual separation and literal separation with a virtual connection, that we have to find ways to maximize the value of any contact we make. But I think people have already gotten pretty good. I’ve been to a bunch of online conferences and festivals, so recreation stuff and business stuff, and now they’re not bad if you take it seriously. And you’re willing to wade through slower process can be done. We don’t have any choice. Simple as that. We don’t have any choice.
Shawn Flynn 33:09
What do you think there’s gonna be opportunities and all this?
Paul Kallmes 33:12
I think opportunity is now where it used where it was before, the needs are still the same. I think there may be things are reprioritized, working with a new tech fund, starting to assemble assembling a value proposition to raise a fund for Ed Tech, because education is the key to everything. The digitalization, the virtualization of education was well underway before 2020. Now it’s the norm completely. I mean, who knows what’s ever going to happen with schools in the future, whether K through 12, or universities or whatever situation, we think there’s a ton of opportunity there. So I’m pleased to be part of that effort as well, I think there’s going to be, it’s hard to say really, because things change so rapidly on the ground here that lots of people come with lots of new solutions. That’s the essence of entrepreneurship, anywhere. But of course, in Africa, we have different conditions, different needs different resources, the solutions will look a lot different. I think the important thing is to be able to identify a solution that you understand well enough to decide whether or not it’s something you want to get engaged with or not as an investor, maybe as a customer, or a supplier or a vendor. I think opportunities are everywhere around the world. But you really need to do your homework outside your home market. You got to do it in your home market to of course, it’s just an added layer of complexity and familiarity in a place like a country in Africa.
Shawn Flynn 34:25
Prior you were the general manager, the vault, what do you think is the future of incubators, especially with COVID?
Paul Kallmes 34:31
I think incubators play a more important role than ever, because you need to find ways to train people again, education is everything. And incubation is really a form of education as much as anything else. Learn what works and learn how to recognize problems, how to solve them. Know when to say when you have the judgment to say well, we’re trying just isn’t working. We got a little bit of money left. It’s not just good money after bad. And I think incubators, because they’re now I say virtually all virtual, they have a long maybe have a longer timeframe, you can do more over a longer timeframe. As long as people have the right expectations about the time it takes to incubate companies from whatever level of maturity to whatever new level of maturity and functionality and operational efficiency, there’s a lot of things to be learned about how to create the content, how to convey the content, how to teach people how to learn. And I’ve done a lot of startup bootcamp classes, and I really enjoy them. But I start every class by saying, you are here to learn the slides I’m going to show on the screen I have a lot in them. By Design, you’re not expected No, no at all today. But I encourage you to take it home and refer to it every once in a while, there’s a lot of new you need to know. So I think we need to re-emphasize the value of learning, and the rigor and the discipline, to learn new things, keep them in mind and to apply them when situations demand too many actions that don’t appear to reflect what ought to be a pretty basic level of understanding of the problem they’re trying to solve, but a knee jerk reaction, or just doing something because we’ve always done it, there’s no worse reading to do something about habits. There’s a lot of ways we can learn, and teach people how to learn, that will make a fundamental difference in the way companies grow in the future. So I think incubators need to assume the role of a parent of an educator or mentor, of a disciplinarian, and but eventually, a coach, pep rally leader to launch them into the world with the right skills and capabilities to succeed, because that’s all we can expect to do. But it’s essential got to be done, right. I’m really happy to be part of that.
Shawn Flynn 36:22
you’d mentioned a little pep rally, get people out in the world. Have you noticed any? I’ve interviewed two people recently, and they both talked about startups mindset. And all that this is all taken on founders in the startup community, the uncertainty, everything changed, and on a whim. Have you noticed anything similar with your global work?
Paul Kallmes 36:45
Not yet, at least not out of the African countries that I work with? About a half dozen at the moment, I see no, no reduction enthusiasm, or unwillingness to try? Granted, I’m just one database, that’s a relatively few 25 or 30 companies that I’ve dealt with, during the pandemic, enough to know how they look at the opportunities ahead of them. They all say, how do we make this work? Not man, I can’t wait till it gets back to normal. Now, I’m sure if you looked around here, do a sample of 1000 startups, you’ll find a spectrum of reactions. But I think in general, as a startup founder, and a founding team that doesn’t have the attitude of we’ve got to make this work we’re going to make this work is not a startup you want to be involved with. So this is sort of a stress test. It’s a non-market force that is really putting startups to the test. And this is a chance for founders to show their real stripes. And do they shut down? Do they expand I mean, this might be a great time to go after what they call Aqua hires go out and acquire an engineering team or a sales team or whatever. Just because the company they work for now is in trouble they might be available, this is a chance also for growth, not just hunkering down and hibernating until the worst passes, the worst may pass whatever that really means. It’s not like the sky is gonna clear and you’re back in the same place you were before, it will be a different world. So if you’re not tracking it as it goes, I think you’re risking a huge downside, when it finally does calm down a bit.
Shawn Flynn 38:03
Is there anything else that you think our listeners or should know or that you’d like want to mention to our listeners about what you’re working on? Anything to do with that any key takeaways
Paul Kallmes 38:14
terms of you are if you’re an investor, and you’re here in the Bay Area, you see a lot, but there’s an awful lot of people looking for the opportunities. So the signal to noise ratio is all wrong for most investors here. Unless you’re one of the top tier firms, you’re going to be fighting in a way fighting for scraps, because valuations will be maybe out of hand by the time you get a crack at something. So don’t be afraid to look at emerging markets. I mean, I was in Romania a year ago, and it was awesome. Romania has all the things that a startup ecosystem needs. They have smart people, they have good English, good technical education, they have some capital markets. And most importantly, they have a collective desire to have a bigger impact in the tech world at large. They also have really good valuations and really good internet access, their internet access puts ours to shame. Don’t be afraid to look at places that are not traditionally considered tech hotbeds, or the sources of opportunities that don’t insist on it being a unicorn, as often tell people unicorn is an imaginary animal that disappears of the market whim. Give me a donkey, a solid donkey, that that’s a real animal, you know, that does 30 or $40 million dollars a year and can carry a heavy load uphill, quarter after quarter. That’s the kind of company worth investing in, at a certain point. So I think having the right expectations, not being afraid of novelty, or unfamiliarity is really important. A willingness to listen, a lot of folks don’t like to listen, I’ve certainly been guilty of that at times. But I think the more you learn to listen to others, the more you’ll find opportunities, you’ll be able to recognize opportunities in places that you wouldn’t have seen before. And that’s a tremendous outcome. Whether or not you actually act on it or not, is almost secondary to the fact you now know it’s there. It might not be for you, but it might be for somebody you know, so don’t be afraid to share information about them. That’s the idea behind Africa house. How do we aggregate and disseminate information to as many people who might benefit from it as possible, because in our mind, there isn’t nearly enough attention being paid to Africa. So we’re going to do our part. Hopefully in inspire others to do the same. If they do great, if not, well, they’re not will keep at it no matter what.
Shawn Flynn 40:05
And if anyone wants to find out more information about you what you’re working on, what’s the best way to go by doing that?
Paul Kallmes 40:11
There’s a lot of traditional ways to go about it, I give you my email address, not my phone number, although I know you have it, they can look up African house at the white just look up white summers, that’s the law firm and an African house page on that, where we’re developing a social media presence for our still nascent consulting efforts with these South African venture funds. It’s happened so quickly, we haven’t put together all that we haven’t needed to just yet. But we will say contact you, you can refer anybody to me that might contact you through the program.
Shawn Flynn 40:41
Alright, and with that, if you’d like to contact all camps, email me, shawnatthesiliconvalleypodcast.com and take a picture of the review that you wrote on iTunes about this podcast episode, before I make that intro just so everyone gets a win-win out of it. And with that, I have to say, Oh, thank you for taking the time on the Silicon Valley podcast.
Paul Kallmes 41:04
Thank you, Shawn. It’s always a pleasure to be here. appreciate the effort you make to spread the good word about Africa. Thanks again. Let’s do this again someday.
Shawn Flynn 41:11
Perfect.
Announcer 41:15
Thank you for listening to the Silicon Valley podcast. To access our resources, visit us at the siliconvalleypodcast.com and follow our host on Twitter, Facebook and LinkedIn at Shawn Flynn SV. This show is for entertainment purposes only and is licensed by the investors Podcast Network. Before making any decisions, consult a professional.
